1.Accounting（Japanese Group Relief System）
The recent tax reform has introduced the Japanese group relief system, replacing the consolidated taxation system. For the present, ASBJ PITF No. 5 “Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 1)” and ASBJ PITF No. 7 “Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 2)” are being revised on accounting treatment and disclosure when employing the Japanese Group Relief System. The exposure draft has been published at the end of last month.
2. Tax (Cross-border Remote Work: Providing Services to a Foreign Corporation Part-4)
This article will summarize the issues being discussed in the previous articles.
We take an example of an employee who entered into Japan from the US on 31 May 2020 and teleworks in Japan with their intention to or a plan to go back to the US sometime. Such employee would be determined as non-resident in Japan for taxation purposes for the year 2020, and we assume the employee has no other income except “salary income” which they receive in exchange for the service rendered to their US employer.
In our example, the calculation of income tax and special income tax for reconstruction will be based on the following:
(1) No tax would be imposed in Japan for the period between 1 January 2020 and 31 May 2020, the date of entry into Japan, as the employee has no domestic source of income.
(2) The salary income, which is attributable to the work done in Japan and earned between 1 June 2020, the next day of the date of entry into Japan, and 31 December 2020 would be considered as domestic source of income. Therefore, the employee would be required to file quasi-final return and pay the income tax, which amount would be calculated by multiplying the amount of salary income received during the said period* by 20.42% (separate taxation method). None of the income deductions including employment income deduction is applicable in this case.
* “Short-term resident tax exemption system” in the tax convention between Japan and the United States would not apply for the employee in our example as the visit duration of 214 days exceeds the 183 days.
3. Labor Management (Expanding eligibility for social insurance for certain part-time workers in phases from October 2022)
Previously, those part-time workers who work for an enterprise with 501 or more employees were required to participate in social insurance system when they meet certain requirements.
The recent legal reform, however, will expand the scope of applicable enterprises in phases as follows:
・From October 2022, enterprises with 101 or more employees
・From October 2024, enterprises with 51 or more employees (the number of employees refers to the total number of “the full-time workers and those workers, including the part-time workers, whose weekly working hours is not fewer than 3/4 of the full-time workers”)
A part-time worker who meets all of the following requirements will be newly eligible for social insurance.
・having 20 hours or more of the prescribed working hours in a week
・expected to be employed continuously for a period of at least 2 months
・having 88,000 yen or more of the monthly wages
・not a student
A large number of part-time workers are expected to be newly eligible for social insurance. We anticipate enterprises take responses such as the advance preparations initiated by grasping the size of newly eligible workers followed by in-house communication, and individual interviews as required.
(Source: Ministry of Health, Labour and Welfare – Special website for Expansion of eligibility for social insurance)
4. This Month’s Words of Wisdom
“Everybody has a plan until they get punched in the face.”
– Mike Tyson, former world heavyweight champion
This aphorism is highly suggestive. Seeing the punch in the face as the greatest risk, some would plan on making good saves, while others prepare a meticulous plan to fend off.
For more details, please refer to Nagamine & Mishima JC Accounting K.K.